Kin Kiu Enterprises Ltd v. Wairika Ltd

HCA005008/1982

Headnote

Landlord & Tenant (Consolidation) Ordinance, Part V, interpretation of Section 121(2)(a), tenancy stated to be for 3 years containing Typhoon, Fire or Force Majeure clause which gives landlord option to determine earlier in the event of premises or part thereof being rendered unhabitable, held such clause was a "provision for earlier determination other than for breach of the provisions of the agreement" and that Part V applied to the tenancy.

BETWEEN

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Coram: Hooper J.

Date: 24 February 1983

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JUDGMENT

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1. In this case the Plaintiff seeks to recover possession of premises which had been let to the Defendant for three years from the 16th April 1979 to the 15th April 1982 and of which the Defendant still retains possession. The Plaintiff contends that the tenancy agreement has expired by the effluxion of time whereas the Defendant contends that it is entitled to 6 months notice of termination under Section 122 of Part V of the Landlord and Tenant (Consolidation) Ordinance.

2. It is common ground that Parts I, II & IV of that Ordinance do not apply.  The sole issue which I have been asked to determine is whether a particular clause in the tenancy agreement is a "provision for earlier determination other than for breach of the provisions of the agreement" within the meaning of Section 121(2)(a) of the Ordinance. The Defendant contends that it is and that Part V of the Ordinance therefore applies. The Plaintiff maintains that it is not and that Part V does not apply.

3. The clause in question is clause 4(h) which is in the following terms -

"4. Provided always and it is hereby expressly agreed as follows :-

4. This to all intents and purposes is identical to the second of the clauses dealt with by Fuad J. (as he than was) in Joseph Edward Hotung and Jimmy's Kitchen Ltd. ⁽¹⁾ and may conveniently be referred to as a "Typhoon Fire and Force Majeure Clause". It was held in that case that such a clause was a "provision for earlier determination" other than for breach etc." and that Part V therefore applied.

5. Despite this Mr. Warren Chan for the Plaintiff seeks to persuade me that it is not such a provision and that it therefore did not bring the tenancy within the operation of Part V. He says 6 months notice to quit was not therefore necessary, the tenancy expired by the effluxion of time and the Plaintiff is therefore entitled to the possession.

6. He argues that Fuad J. in the Hotung Case adopted a literal approach to the construction of Section 121(2)(a) whereas the correct approach should have been what he called a "purposive" approach having regard to the terms of Section 19, Cap. I.

7. In support of his contention he refers to a line of cases in which the interpretation of Section 121(2)(a) or its predecessor fell to be considered, and suggests that the approach in all these cases has been "purposive".

8. The first of these cases is Fu Hop Investment Co. Ltd. v. Chen Hong Man & others ⁽²⁾. That case is of particular interest because the clause considered by the Court was also a "Typhoon, Fire and Force Majeure Clause". The judge in that case (Williams J.) was of the opinion that one has to examine the clause and construe it against the lessor in so far as it may be a provision for his benefit and that it must be construed by the reference to the purpose of the lease. He took the view it could scarcely be regarded as a provision to the landlord's advantage. He reached the conclusion that the clause did not bring the lease within the Ordinance which was the predecessor to Part V.

9. The second case Mr. Chan relies on is Winning Enterprises Ltd. and Peking Restaurant Ltd. ⁽³⁾ That case concerned a clause in common usage in Hong Kong enabling the landlord to reenter the premises on the tenant's breach of covenant to pay the stipulated rent and also if the tenant, a limited company, was wound up or suffered its goods to be levied in execution. It was held by Briggs J. (as he then was) that a tenancy agreement must be looked at as a whole and that in that case the only provisions for "earlier determination" were for breach of the provisions of the agreement within the meaning of section 2(2)(a), Cap. 335 (the predecessor to Part V).

10. The third case on which Mr. Chan relies is Yu Wan Estates Ltd. v. Ding Kwei-tsoh ⁽⁴⁾. That case concerned a provision similar to the clause in the Winning Case. Trainor J. (as he then was) decided in effect that the clause meant that the tenant undertook not to become bankrupt and not to permit his goods to be seized by the creditors, but that if he did the tenancy was forfeited and the landlord had the right to reenter. In other words it was not a provision for earlier determination other than for breach and that Part V did not apply.

11. In reaching this conclusion he said :-

"where legislation purports to interfere with the contractual arrangements between the parties the legislation must be strictly interpreted so that no greater interference is allowed than that intended by the Ordinance. It is clear that Part V of the Ordinance intended to limit its interference to tenancies of less than three years ; it did not intend to affect any bona fide agreement for a term of three years or more. But it did intend to catch any tenancy agreement which introduced a subterfuge to avoid such protection as the Ordinance provided."

It was his contention that applying this test there was no subterfuge in the tenancy agreement before him.

12. This decision was upheld by a majority of the Court of Appeal (Briggs C. J. and Pickering J. A. with Huggins J. A. dissenting).

13. Mr. Chan argues that the Court of Appeal must have accepted the approach of Trainor J. which was a purposive approach, and that this Court is therefore bound to follow the same approach.

14. Finally Mr. Chan relies on Sze Yuen Co. Ltd. and Kwan Hang ⁽⁵⁾ as yet another illustration of what he calls the purposive approach to the construction of Section 121(2)(a). In that case Hunter J. asked himself the question whether the legislation must be taken to have had in mind exclusively the estate in land, or whether it was more probable that it had in mind simply the measure of contractual obligation. He came to the latter conclusion.

15. It was Mr. Chan's contention that the correct approach to this case now before me is to ask two questions :

16. Therefore Mr. Chan argues that the Court should not hold that clause 4(h) is a "provision for earlier determination other than for a breach" because even though the winding-up clause and the bankruptcy clause referred to above were not literally speaking "provisions for earlier determination other than for breach" they had nevertheless been held to be such adopting the purposive approach.

17. Mr. Chan argues that Mr. Justice Fuad in the Hotung Case was out of line with a long line of decisions and urges me to adopt a purposive approach.

18. Mr. Wei for the Defendant company relies on the judgment of Mr. Justice Fuad in the Hotung Case. It is his contention that the debate about whether a literal approach or a purposive approach should be adopted does not arise when the words used in the statute are manifestly clear. The words "other than for breach" he says cannot be clearer.

19. He distinguishes the Winning Case and the Yue Wan Case as dealing with a clause different from a typhoon clause.

20. He also raises an argument based on certain remarks of Briggs J. on the effect of section 8 of Cap. 335 (the predecessor to section 127 Part V).

21. As between the two cases dealing with a typhoon clause he urges me to follow the Hotung Case in preference to the Fu Hop Case because he says it is not now known what the exact terms of the clause were which came before Williams J., whereas it is known what the exact terms were of the clause which come before Fuad J. He argues that the latter clause was on all fours with the clause in the present case.

22. He distinguishes the Sze Yuen Co. Ltd. Case by pointing out that there was an ambiguity of meaning there which Hunter J. was bound to resolve.

23. There are two other decisions which support Mr. Wei's contention that the words of the statute are clear.

24. The first is Shek Kau and Poon Kam-cheung ⁽⁶⁾ in the District Court where Cons D. J. (as he then was) held that a tenancy for 3 years, which gives an option to the tenant alone to determine the tenancy within that period, is not excluded from the application of Cap. 335.

25. The approach of the judge in that case is shown in the following passage :

"A further argument of the landlord is that the construction sought for by the tenant in the present instance would give birth to a unique creature in the tenancy world, namely, a domestic tenant holding both a long lease and the benefits of a six months notice to quit; that the legislature should not be taken to have acted so strangely without express provision in clear, uncompromising words. It is an accepted principle that where a statute is ambiguous, it should not be construed to produce capricious results; but it is equally the case that a Court should not misconstrue clear words because it suspects that some unintended results may follow.   Moreover, even if the creature suggested is unique, he does not strike me as so monstrous or undesirable that I should usurp the authority or duty of the Legislature to put him down. "

26. The second decision in support of Mr. Wei's contention that the words of the statute are clear is Hung Ming Hua & Others and Chow Hung Hin ⁽⁷⁾ in which Mantell J. followed and adopted the reasoning of Fuad J. in the Hotung Case.

27. The clause which Mantell J. had to consider was not identical to the Typhoon, Fire and Force Majeure Clause which Fuad J. had to consider, and which I have to consider, but it was substartially similar in its effect. Furthermore it made it clear that the event for which provision was made for reentry by the landlord was "not attributable to the act or default of the tenant". In other words it expressly excluded a breach of contract by one of the parties.  Mantell J. had difficulty following the reasoning of Williams J. in the Fu Hop Case.

28. I have set out as briefly as possible the respective arguments of the counsel for the two parties in this case and I have referred to two other authorities which support the Defendant's contention that the words of the statute are clear.

29. With the greatest respect I agree with Fuad J. in his reasoning that this Typhoon, Fire and Force Majeure Clause is a provision for earlier determination other than for breach and that Part V applies.

30. It seems to me that the wording of section 121(2) (a) is patently clear. It clearly means "other than for breach".  One cannot use section 19 as an excuse to adopt an interpretation which contradicts the plain meaning of these words. Indeed it appears to me the inter-pretation which Trainor J. put upon these words in the Yue Wan Case was to hold in effect that the word 'breach' was intended to mean an act or default by one of the parties to the contract contrary to the provisions of the contract. He was at pains to construe the clause that appeared before him so as to include an implied undertaking not to permit the event to happen and that in the event that it did the party at fault was in breach. Once that construction was put upon that clause it could not be considered a provision for determination "other than for breach".

31. Of course we don't know the reasoning of the majority of the Court of Appeal which upheld Trainor J.'s judgment because the Court of Appeal judgment is not now available, but it seems to me that they must have accepted his construction of the clause before him.

32. So far as the Winning Case is concerned, Briggs J. took the view that section 2(2)(a) was aimed at preventing the parties from side-stepping the Ordinance. He didn't however specifically say that that was the reason for reaching the conclusion that the Ordinance did not apply to the tenancy agreement before him, but he did hold, as did Trainor J., that the provision before him was for earlier determination for breach of the provisions of the agreement.

33. It seems that Briggs J. might have been influenced by his view of section 8 of the Ordinance (now section 127). He said of section 8 :-

"This section expressly preserves the right of the landlord to recover in the events there mentioned, including the winding-up of the tenant's business. A tenant of a lease for less than 3 years may be protected by the Ordinance and entitled to six months notice of determination. But a tenancy containing a provision such as is mentioned in this section of the Ordinance would not be protected for that reason. Why then should be a tenant of a lease for more than 3 years be so protected? "

34. With respect I don't follow that reasoning. It seems to me that section 8 was not dealing with the question of 'protection', i.e. whether the Ordinance applied to the tenancy or not; it was dealing with the preservation of common law rights in the situation that the Ordinance did apply to the tenancy. A tenancy for less than 3 years would have been 'protected' even if it contained such a provision referred to in section 8.

35. Of course one must look at section 127 when considering the interpretation to place upon section 121(2)(a) because when considering one section of a statute, one should do so having regard to the provisions of the statute as a whole. Section 127 makes a distinction between a breach of contract and the condition providing for a right of reentry in the event of certain happenings other than breach.

36. I respectfully agree with the judgment of Mr. Justice Fuad and I hold that the Typhoon Fire and Force Majeure Clause which I have to consider in the present case is a provision for earlier determination other than for breach and that Part V applies. I therefore hold that the Plaintiff is not entitled to the possession and I dismiss the Plaintiff's claim with costs.

(1)    1982 H.K.L.R. 196 (HC) at P.200

(2)    H. C. A. No. 680 of 1969 (unreported)

(3)    1971 H. K. L. R. 240

(4)    H. C. A. No. 932 of 1976 (unreported)

(5)    1982 H. K. L. R. 330

(6)    1970 D.C. L. R. 79

(7)    H.C.A. 9233 of 1981 (unreported)

Representation:

Yung, Yu, Yuen & Co. for the Plaintiff

Messrs. Deacons for the Defendant